Okay, this one's a little complicated and policy-wonkish, but I can't believe we haven't heard about this from the Obama camp every day since the New York Times reported it on May 1. Fortunately, a blogger for Time pointed it out the other day, so here it is, and no, sadly, I'm not making this up.
Most of us get health insurance through our employer, who pays a significant portion of our premium. This is currently a tax-exempt benefit, and can be substantial -- health insurance for a family can run as high as $12-14,000 a year. McCain proposes to treat the portion of our plan paid for by our employer as wages rather than benefits and tax this money as wages, subject to income and payroll tax. He then says that he will offset this extra tax by giving us a tax credit: $2500 a year for individuals and $5000 for families, to grow with the rate of inflation.
Problems:
1. Health insurance premiums rise faster than the rate of inflation, so as taxes on your "new wages" increase, they will be less and less offset by your new tax credit and in a few years you end up paying more in taxes. [McCain raising taxes! Shock! Horror!] If your tax bracket is already high, or your state income tax is high, so much the worse for you.
2. People who have really good health insurance may start out paying more in taxes than the tax credit covers the very first year. McCain says this will be only the wealthy, but I can tell you as a physician that I see plenty of lesser-paid union and government employees who have outstanding health insurance and will probably face the same problem.
3. Your employer is now paying for health insurance premiums plus taxes on this new taxable "wage." S/he may find this new expense too much to handle and either downgrade your insurance or abandon this benefit that the federal government no longer considers a "benefit" but part of your "wages." Now you have to find and pay for health insurance on your own. Hope your employer gave you a really big raise when your health insurance was terminated. For that matter, I hope you don't have diabetes. Hope your child hasn't had four ear infections in the past year. Hope you're not a woman of childbearing age.
3a. This is actually what McCain is hoping will happen -- according to the NY Times article, he wants the free market to do it's thing by encouraging people to buy health insurance on their own instead of receiving it from their employers. This is a big part of his goal in taxing employer-paid health premiums.
4. If you're poor or have a chronic illness, $5,000 isn't going to help buy you health insurance on the free market. Low-income families need much more help than that to afford the $14,000 that family health care costs. And when uninsured people show up in the emergency room for free care, it raises the bill for the rest of us who do have insurance. Fiscally speaking, the best bet is to insure everyone and spread the risk to keep premiums as low as possible.
5. When local governements have to pay taxes on health benefits for their employees, it will mean less money in the budget for other things, like parks, and teacher salaries, police, fire, hospitals, etc. Or perhaps our property tax rates will increase.
Notably, the other part of McCain's health care plan is deregulation of the health insurance industry. Have you heard him say that you should be able to buy health insurance from other states? What goes hand in hand with that is removal of some of the consumer protections for people in those states. Have you ever had a claim denied? Still want to remove whatever laws regulate insurance companies? This is really glossed over on his campaign web site. Wonder why. After all, we know how well it worked out when they deregulated the trading of energy futures (think Enron), when they deregulated the mortgage and securities industries (mortgage crisis). I could do without a disaster that will leave me without access to healthcare, thank you very much.
For a more involved report, see John McCain's Radical Prescription For Healthcare. It comes from a less-than-objective liberal group, but the report itself is pretty good. I especially recommend the discussion on page 10, which describes further why people with pre-existing conditions won't be able to afford insurance in the free market, but is way more complicated than I could get into here.
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4 comments:
wow!! unbelievable....wait...actually it is!!!
I'm not in favor of raising taxes, but if you have to, this one makes more sense than the ones Obama has proposed, ie death tax, capital gains tax. Every other employee benefit (cars, etc.) is taxable AND the employer has deducted it from their taxes, making a net zero, whereas it's a loss for the government now. On inheritance tax and capital gains, those taxes have already been paid once. If Barry was truly about making things fair, he'd follow McCain's lead.
Anonymous,
First, health care isn't a luxury like a company car. When the problem is that health care is already too expensive for those who have it and so expensive that many employers/employees cannot afford it all, the answer isn't to tax it and make it even more expensive to both employers and employees. We're trying to encourage MORE health care coverage, not create an incentive for less.
Second, as to your general points about taxation, every tax we pay is in some ways a multiple tax on the same thing. My salary is taxed, and yet so are my employer's profits, and so was the income of the consumer who bought our product, and so were all of our suppliers, etc. Every tax is a multiple tax.
The "double taxation" argument against estate taxes proves too much.
The one thing we should be taxing less is salaries. Work should be encouraged. It's crazy that we tax hard-earned salaries more than we tax unearned inheritances. And since capital gains constitute a higher proportion of one's earnings the higher you go in the economic ladder, it's nuts that we tax salaries earned by average Americans more than we tax capital gains earned by the elite.
Attacking job-based health care, as McCain is proposing, is an attack on hard-working Americans.
Who is he putting first? Insurance companies.
/jc
Yet another example of how the media has twisted this issue and allowed so many people, including Obama, to get away with a flat out lie. Does no one really research things? Are you all lemmings with whatever the media says?
Before you break out the needles, read this and read it carefully several times to digest it. Seriously. This is a non-partisan examination of the actual issues involved with the health care issues and why McCain's plan WILL benefit those average blue collar workers AND the growing ranks of us who work for ourselves.
http://www.cfif.org/htdocs/freedomline/current/in_our_opinion/Will-John-McCain-Really-Tax-Your-Health-Care-For-the-First-Time.htm
The liberal way is to have Government care for everyone at all times. This is called Socialism. The health care system DOES need to be revamped and improved, on that there is no doubt. But nationalized health care as in Canada and the UK is not the answer. Again, do the research and learn for yourself, don't take my word for it.
Go the site for the PBS program "Frontline" and watch their completely bi-partisan report on the various world health care systems and THEN comment.
Everyone lies. Obama is just doing it with the media behind him.
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